1. Warmup
John’s billing cycle started on Aug 4th. His beginning balance was $ He had the following transcations:
Aug spent $54.96
Aug spent $123.07
Aug paid $300.00
Find John’s average daily balance.
Assuming he did not pay his bill in full, calculate John’s finance charge if his APR was 24.9%.

2. Topics covered Types of credit cards Card offers
Card terms and conditions
Credit card billing statements
Using credit cards
Card fees
Optional services and card benefits
An educational partnership between Consumer Action and American Express

3. Look closely Credit limits Balance transfers
While the offer of credit may be guaranteed, the actual credit limit may not be
Balance transfers
If you don’t know your credit limit, it’s difficult to know if you can transfer balances from another card
An educational partnership between Consumer Action and American Express

4. Card Terms and Conditions
An educational partnership between Consumer Action and American Express

5. Cardholder agreements
Sent with every new card
Legal contract between consumer and the card issuer
By using the card, consumer agrees to honor the terms and conditions in the agreement
An educational partnership between Consumer Action and American Express

6. Annual percentage rate (APR)
Card’s interest charge, expressed as a yearly rate
The interest rate is the cost of borrowing money from the credit card company
Your card’s interest rate is usually for purchases — if you withdraw cash you might be charged a higher interest rate
An educational partnership between Consumer Action and American Express

7. Variable rates
If card has a variable rate, the APR will change when interest rates go up or down
Variable interest rates change according to a set formula using an “index” and a “margin”
The most common index is the Prime Rate published in the business sections of major newspapers and online
An educational partnership between Consumer Action and American Express

8. Prime Rate
Example #1
If your credit card has an APR of “Prime + 10%”, what is your APR with the prime rate today being 3.50%?
What will your APR be if the prime rate changes to 5%?
An educational partnership between Consumer Action and American Express

9. Fixed rates
If an issuer calls a rate “fixed” the rate can’t change ever, for any reason. So issuers will use terms like “non-variable” for rates that do not vary with the Prime Rate.
Non-variable rates can change at any time after the first year, or whenever you are more than 60 days past due, with 45 days notice
An educational partnership between Consumer Action and American Express

10. Default or penalty rates
Higher interest rates charged for late payments or decline in credit
Higher rate will apply to new transactions only, unless you are more than 60 days late
An educational partnership between Consumer Action and American Express

11. Cash advance APR
Most cards charge a higher interest rate for cash advances
Special checks - “convenience checks” – can be linked to credit card account
They can be used to transfer a balance from another card or to make purchases or payments to companies that do not accept credit cards
Convenience checks are charged the cash advance interest rate
An educational partnership between Consumer Action and American Express

12. Credit Card Billing Statements
An educational partnership between Consumer Action and American Express

13. Credit card statement items
account number
credit line
available credit
billing date
payment due date
transactions
debit/credit
previous balance
payments/credits
new purchases
late charge
finance charge
new balance
minimum payment
average daily balance
number of days in billing cycle
APR
monthly periodic rate

15. Example 1
The summary portion of Jane Sharp’s credit card statement shown is above.
Explain how the new purchases amount was determined.
What would be the new balance?

16. CHECK YOUR UNDERSTANDING
Write the formula to compute the new balance using the column names

17. Example 2
Pascual has a credit line of $15,000 on his credit card. His summary looks as follows. How much available credit does Pascual have?

18. CHECK YOUR UNDERSTANDING
Rhonda had a previous balance of $ and made an on-time credit card payment of $ She has a credit line of $3,000 and made purchases totaling $654 and had a refund of $82. What is her current available credit?

19. Example 3
Myrna is examining the summary section of her credit card statement. Myrna has checked all the entries on her bill and agrees with everything except the new balance. Determine where the error was made.